e-Commerce sales &amp; use tax exchange system and method

ABSTRACT

The invention provides a system and method for calculating, collecting and/or disbursing one or more third party payments owed to one or more third parties resulting from one or more electronic transactions occurring over a wide area network (WAN) between a customer and a merchant. The transaction concern one or more services and/or products provided by the merchant. The system and method require that the calculation of the amount owed to the third party occur at a WAN node that is different than and at a different locale than that of the merchant. By so doing, the merchant is not required to purchase and install equipment and/or software of the third party to which a payment is due. The present system includes a merchant node, third party payment processing node, financial network, and third party payment receiving node. A consumer conducts a transaction at a merchant node. As a result of the transaction, a third party may or may not be due a payment. The third party payment processing node determines whether such payment is due, calculates the amount of the third party payment, and/or authorizes payment of the third party payment. The financial network, which includes at least the merchant&#39;s acquirer bank, the customer&#39;s credit card issuing bank and the credit car association, then handles payment of the amount(s) due to the third party, the amount(s) due to the merchant and the amount(s) owed by the customer. The system of the invention can be a fee for service type of system wherein those (the merchant or the third party) that employ the system and/or method pay a fee, for example per transaction or per amounts collected and disbursed, to the provider of the claimed system.

FIELD OF THE INVENTION

[0001] The present invention relates generally to a system and method ofcalculating, collecting or disbursing third party obligatory paymentsimposed upon network transactions, and more specifically, to a systemand method of calculating, collecting or disbursing sales and use taxesimposed upon e-commerce transactions conducted over the Internet.

BACKGROUND OF THE INVENTION

[0002] Online annual spending exceeded $150BB during FY 2002, a year ofeconomic slowdown, with average sales per online shopper exceeding$1,000 per year, and anticipated to reach $1,500 by FY 2004¹. Unless anexception exists, the retail components of these transactions aretaxable at the point of sale, under the sales tax category. If nexusdoes not exist to qualify the transaction under the sales-taxrequirements, the transaction is taxable at the point of consumer, underuse-tax rules.

[0003] Sales tax is a form of taxation that is imposed upon the purchaseof goods and services, and is imposed upon the purchase and leasing oftangible property, unless specifically exempted. Sales tax ordinarilyarises when the seller and buyer are in the same state. Use tax isimposed for the storing and consumption of goods and services within thegeographic realms of the taxing authority, and is designed as acatchall, to catch those transactions that are not subject to salestaxes. Use tax occurs only when the seller does not have a nexus withthe buyer's state.

[0004] Sales & use tax are imposed upon the purchaser, howevercollection and disbursement of sales tax revenue is imposed upon themerchant. Retailers become the governments' agent and are required tocollect the tax, on behalf of the states, at the point of sale. If theseller and buyer are not located in the same state, consumers aresupposed to pay a comparable “use” tax that is paid to his/her state ofresidency.

[0005] Requiring online retailers to collect sales tax on consumerpurchases does not create a new tax on Internet transactions, it merelyrequires existing taxes to be extended to govern similar transactions,which are conducted via a new means. Consequentially, requiring onlineretailers to collect these taxes would not go afoul with the InternetTax Freedom Act, which was initially enacted in 1998, and recentlyextended through 2005². This moratorium only prohibits imposing newtaxes upon Internet related activities (such as Internet access orbit-use taxes), however it does not prohibit the enforcing of existingtaxes.

[0006] Sales taxes (and their foreign equivalents—VAT—Value Added Taxes)are a major funding source for national government operations. In the USsales taxes exceed $180B annually (including state and localjurisdiction taxes, ranging at levels between 5-10% of the transactionamount) and fund approximately 33% of all state tax revenue. In the EU,VAT (with tax rates varying from 15% in Luxembourg to 25% in Denmark orSweden) accounts for 40% of government revenue³. The European Union hasissued regulations that would require all businesses, including foreign(i.e. US businesses) to collect European based VAT on on-linetransactions. These regulations are scheduled to come into effect Jul.1, 2003, and will also encompass ASP services, web hosting, sale ofdownloadable software, electronic books, streaming music, digitalmovies, computer games and

[0007] As online activity increases, these government entities arecoming to the realization that they cannot afford to forego this revenuesource. The problem that they have been encountering to date is that ofenforceability and practicability. The US General Accounting Office hasestimated that states lose over $12.5BB annually on untaxed Internettransactions⁴. With over 45 states in the US alone which impose salestaxes, and over 7,000 US local jurisdictions with their own individualsales tax rates, and scores of individual nations with even differenttax rates, it is easy to comprehend how, in an environment where theconsumer and the retailer may be residing in different localities at thetime of transacting, imposing collection obligations upon retailers (whomight not even know where the consumer is located) would place an undueburden upon online transactions, bringing the Internet to a stagnatinghalt. By 2006, this loss will triple to $45B, ranging from 2.5% to ˜10%of states' total sales tax collection⁵.

[0008] In conclusion, it is reasonable to state that sales taxes (andlike-taxes, such as VAT and use taxes) formulate an indispensablecomponent of state revenue. The volume of internet transactions is onthe rise, and these are assuming an ever increasing component of theeconomic environment. As such, local governments cannot forego revenuethat could be derived from enforcing sales and use taxes upon on-lineactivities that parallel those taxes that are imposed uponlike-transactions that are conducted off-line.

[0009] The very borderless component of e-commerce, that enhance theeconomic viability of Internet transactions, also increase thecomplexity of the tax regime because of the multitude of potentialtaxing authorities—over 7,500 in the US and hundreds moreinternationally. Merchant compliance of the reporting and collectionrequirements is low because of the significant resources required todedicate for complete compliance, including financial, human andtechnical resources required to implement systems at the point-of-sale,maintain and operate them. Merchants do not have an incentive to complyby implementing point-of-sale systems also because of low levels ofgovernment enforcement. Consumer compliance is also low because of theabsence of any enforcement mechanism that can impose use-tax complianceduring the corresponding product/service distribution.

[0010] It is important to develop a system and method that will enablethe easy collection and disbursement of sales and use taxes that are tobe imposed upon e-commerce transactions. To ease implementation andenhance compliance levels, any such tax collection and disbursementsystem must be integrated into the current transaction flow, withoutrequiring any changes to the system-flow currently in place. To increasethe likelihood of enforcement by the judiciary system, such a systemmust not place undue burdens upon the merchants who are mandated withthe collection and disbursement of the collected tax revenue.

[0011] U.S. Pat. No. 5,644,724, to Cretzler, discloses a system andmethod for the collection and remittance of tax in real time at point ofsale locations. The system includes a group of point-of-sale terminalsat merchant point-of-sale facilities that review and store taxcollection information under merchant control. A bank computer at amerchant bank accesses the stored tax collection information and wiretransfers the collected sums periodically to at least one computer at atax authority bank. For credit or debit transactions, a service computerreceives the tax collection information daily from certain ones of thepoint-of-sale terminals, and wire transfers the credited or debitedtaxes to the tax authority bank computer.

[0012] U.S. Pat. Nos. 5,875,433 & 5,799,283 & 6,078,899, to Francisco &Petschauer, discloses a point of sales tax reporting and automaticcollection system including a smart tax register located at a retailerlocation. The retailer smart register processes consumer transactionsand calculates the amount of sales tax due the retailer by the consumerfor each transaction. Following the transaction, the consumer requestsand is given a tax paid receipt. After the sales tax is paid to theretailer by the consumer, the register either immediately orperiodically forwards the amount of the transaction and the amount ofsales tax collected by the retailer to a computer and memory located ata remote location (e.g. state government taxing authority). The computerand memory receive and store the retailer's transaction and sales taxinformation, and periodically report same to the taxing authority. Afterreceiving the retailer's sales tax information, the computer accessesand debits an account belonging to the retailer; the amount debitedcorresponding to the amount of sales tax collected by the retailer. Insum, the system automatically reports all retailer transactions andsales tax collected by retailers from consumers to local and federalgovernment authorities and then automatically collects the sales taxamounts from retailer accounts so as to prevent retailers from turningover the collected sales tax. A tax paid receipt is given to eachconsumer as evidence that the tax paid will be turned over to the properauthorities. The systems disclosed in these patents create reports onsales tax and provide means of reporting the tax to the state andfederal government. These systems do not, however, address thedistribution of these taxes.

[0013] U.S. Pat. No. 5,774,872, to Golden, et al, discloses an automatedtransaction tax reporting and collection system. The system includesindividual point of sale terminals disposed at each remote vendorlocation. The points of sale terminals are networked to a centralcomputer, preferably via a plurality of intermediate data collectionsub-stations. Each terminal includes means for inputting and storingdata regarding taxable transactions, as well as for storing datareflecting the tax accrued on each transaction. This stored data iscollected on a periodic, rotating basis by the corresponding datacollection sub-station according to control signals generated by thecentral computer. All of the collected data is ultimately transmitted tothe central computer, which is operative to generate reports reflectingthe transaction tax due from each remote vendor location. These reportsmay then be sent to the taxing authority, the individual merchants,and/or to other taxing authorities, such as the federal government.Preferably, each point of sale terminal also includes a printer thatprints an official tax receipt for each transaction recorded.

[0014] U.S. Pat. Nos. 6,016,479 & 6,347,304 B1, to Taricani, discloses asystem for recovering tax revenue. One implementation of the disclosedinvention is to recover tax revenue not being recovered by storing datain a database indicating interstate sales transactions on which a sellerdoes not collect a designated tax, such as a sales tax. This database ispart of a computer network which organizes and stores the data in thedatabase and automatically sends out tax due notices to purchasers whendata in the database indicates that an interstate sale has taken placeand no designated tax has been collected from the purchaser by theseller. This database can also be updated to reflect payment of the taxindicated in the tax due notice, and can automatically remit appropriaterevenues to a revenue agency when the tax due notice has been paid. Oneimplementation is also collecting a simplified tax on all interstatesales transactions, and then storing data in a database indicating thiscollected simplified tax and data as to a revenue agency entitled to thetax based on the purchaser, the state of residence of the purchaser,etc. Based on this data in the database, the collected simplified taxescan be proportioned and routed to the appropriate revenue agency basedupon on a pro-rata basis of the seller's sales to the residents ofdifferent states.

[0015] U.S. Pat. H1,830, to Petrimoulx, et al, discloses a computerimplemented system for tax preparation and tax submission enablingaccrual and determination of use-tax. The system acquires transactioninformation, characterizing purchases of goods and services, and usesuse-tax accrual and tax-rate logic to generate transaction records andtax information. The system include update logic for periodicallyacquiring new tax information for a tax rate database to keep tax rateinformation current. The system also includes sales tax crediting logicso that paid sales taxes can be credited to accrued use taxes.

[0016] U.S. patent application, Publication No. 2003/0055754 A1, toSullivan, discloses a transaction tax compliance system which receivestransaction information from selling and purchasing input systems, andreturns, stores and reports the tax liability caused by the transactionevent.

[0017] U.S. patent application, Publication No. 2003/0061131 A1, toParkan, discloses a system and method for receiving, transforming,analyzing, storing and reporting tax and financial information in acomputer-based tax information system. The system performs the functionof applying tax rules to arrive at adjustments and individual taxliabilities, and the preparation of tax reports, forms and schedules.

[0018] U.S. patent application, Publication No. 2002/0052792 A1, toJohnson et al, discloses a system that assesses the taxability of goodsor services sold. The system conducts an analysis of products sold orservices rendered either online or offline, and provide the seller withthe ability to monitor the tax status, including tax rates of any goodsor services sold in any number of taxing jurisdictions. The systemincludes a master, shared, third-party data-base, compiled from aplurality of client databases, which links uniform commodities codetechnology, such as UPC, to tax assessment information for goods andservices sales transactions made by any number of merchants inpotentially unlimited taxing jurisdictions. The system generates andfiles tax reports.

[0019] U.S. patent application, Publication No. 2002/0116302 A1, toWilmes, et al, discloses a transactional tax settlement system for usewith a personal communication device. The system determines a taxingauthority and calculates a tax rate imposed by the taxing authority in acommunication network environment. The system may be used to determine atax authority and corresponding tax rate for a buyer/seller transactionover a network, such as the Internet. The system includes a taxinformation system for determining the taxing authorities andcorresponding tax rates by evaluating factors pertaining to thetransaction such as, location, tax status, and transaction description.In addition, the tax information system may validate a payment modality,collect taxes, and account for the transaction

[0020] U.S. patent applications, Publications Nos. 2002/0194123 A1 and2002/0198832A1, to Agee et al, discloses a system and method forcollection and distribution of taxes. The disclosed embodiments of theinvention provide a system and a method for point-of-sale collection anddistribution of sales taxes on a frequent, regular basis, such as dailyor weekly or other periodic time intervals, that can be used fore-commerce transactions. The disclosed embodiments provide a system anda method for transferring funds from numerous merchants to numeroustaxing authorities in an efficient manner, with each merchant seeking totransfer funds to perhaps several taxing authorities and each taxingauthority seeking to receive funds from many merchants.

[0021] Several companies provide products and services with a purpose toassist merchants in their compliance with sales tax collectionrequirements, by either providing tax calculation services, or taxcompliance services. These services typically include providing preparedforms for the merchant to file with the tax payment, or creating amerchant account from which tax payments are disbursed to the taxingauthorities. All of these systems require implementation by the merchantat the point of sale, imposing a burden upon the merchant, forcing themto dedicate financial, technical and human resources for systemimplementation and management. Consequently, compliance is still at verylow levels. Most of the existing solutions charge license fees,transaction fees, or both. This further decreases compliance levels.Charging fees from the recipient of the tax collection, rather than fromthe payor, the merchants, will increase compliance levels accordingly.

[0022] No system exists that offers functionalities that assistconsumers in their compliance requirements with use tax rules. Theclaimed invention is the only known service that will enable enforcementof compliance with use tax rules with the same ease as for theenforcement of sales tax rules.

[0023] The systems known in the industry that operate in the sales taxvenue can be broken down to the following main categories:

[0024] Home-grown systems: Very small and very large companies have bothbeen inclined to develop their own systems for online tax compliance. Asmall seller is likely to be collecting tax in only one state, and islikely to perform some self-programming functionalities to enablecollection of local sales tax. Very large companies, especially thosewith worldwide operations, may develop proprietary custom tax collectionsystems, suited to their own needs. However, these are extremely complexand costly to develop, let alone maintain.

[0025] Tax Compliance Software: Most companies that seek to becompliant, license a commercial solution. The company can license theprogram directly from its developer, or as part of a shoppingcart/billing system—one component of a comprehensive online order-entrysystem. The following providers are known to offer sales tax softwarelicenses to a broad range of companies:

[0026] RIA InSource (http://www.riahome.com)

[0027] Taxware (http://www.taxware.com)

[0028] Vertex (http://www.vertexinc.com).

[0029] A standalone license can be relatively expensive to license,integrate, operate and maintain. The advantage of a standalone licenseis the ability to configure it specifically to the needs of themerchant, the licensing entity. However, a standalone license requires afair amount of in-house maintenance. So, a good size budget must beallocated to the tax function. An alternative method is that ofsublicensing tax compliance software through a commerce service provider(CSP). A CSP is a company that hosts websites on its servers, and aspart of the service makes available a selection of e-commerce orderprocessing software packages, including some kind of sales taxcompliance capability, usually provided by one of the major providerslisted above.

[0030] Application Service Providers: Sales tax application serviceproviders (ASP) are online companies that perform tax calculations onbehalf of Internet-based sellers. Sales Tax and Electronic CommerceSales information is taken by the Internet-based seller, and passed tothe ASP, where tax calculations are made. The resulting tax amount issent back to the seller, where it is used to complete the transaction.In some cases an ASP will merely calculate the tax and send thatinformation back to the seller. In others, the ASP can collect the taxand remit it to state and local tax collectors as well, thus relievingthe seller of the entire tax collection and remittance burden. ASPs thatare known in the industry to offer services to online sellers include:

[0031] eSalesTax (http://www.esalestax.com)

[0032] Sales Tax Clearinghouse (http://www.thestc.com)

[0033] ASPs relieve the seller of a substantial economic and humanresource burden. Some ASPs charge on a per transaction basis, relievingthe seller of substantial fixed fees and upfront costs; or the servicemay be free. On the other hand, if the Internet is slow, or if the ASPdevelops bottlenecks, transaction-processing time can be impeded. Oneprovider is known to be currently testing a system in which it isoffering merchants the ability to integrate tax calculation andcollection services. These services are provided at the merchant level.The eSalesTax system performs the tax collection services by debitingbank accounts that the merchants open for the benefit of the serviceprovider, into which the merchants deposit sums that are dedicated tocover sales tax obligations. The tax collection method is not automatedin that it is not integrated into the transaction flow of funds.Consequently, there is a loss of control by the merchants over thepayment process. This could lead to a need to increase the levels ofmanagement and control resources required by the merchant, as well as totransaction complication. For example, if the transaction is reversed bythe consumer, the merchant will need to proactively perform a parallelreversal and request a debit from the service provider, a process theprovider will not be able to perform in as seamless and easy a manner ascan be conducted when the tax collection process is integrated into thefund transfer process, as is the case with the claimed invention.

[0034] As listed above, several products and services are currentlyknown that assist in the calculation of sales tax. However they are allimplemented at the point of sale, which require merchant compliance, anddedication of significant resources (financial, technical and manpower)for implementation, maintenance, upkeep and operations. They are, withthe exception of esalestax.com also relegated to tax calculation andform completion tasks only, and do not provide fully integrated taxcollection and disbursement functionalities. All of the systems known,even those that are moving in the direction of providing a morecomprehensive service, are rendered at the point of sale, and the taxcollection component is not integrated into the fund transfer processes.These lead to significant limitations when compared to the benefitsachieved by the claimed invention.

[0035] All of these inventions require significant actions to beperformed by the merchant at the point-of-sale in order to perform thedifferent actions of calculating, collecting and disbursing sales taxes.As inventions that focus upon the merchant's point-of-sale, the priorsystems do not typically enable the calculation, collection anddisbursement of use taxes, actions that are imposed upon the consumer,by a third party system. Accordingly, a need remains for a system andmethod that would ease or entirely remove the burden from the merchantfor sales tax actions, and from the consumer, for use tax actions,enable the calculation, collection or disbursement of taxes.

SUMMARY OF THE INVENTION

[0036] The system and method of the invention seeks to overcome thedisadvantages inherent in the conventional systems and methods for thecalculation, collection and disbursement of sales, use and other taxesimposed upon Internet related transactions. The present inventiondiscloses the system and method according to which the actions ofcalculating, collecting or disbursing sales or use taxes are performedat phases of the e-commerce transaction that are not the merchant'spoint of sale, such as, by way of example, on the systems of themerchants' gateways, the acquirer merchant bank, the credit-cardassociations or the issuing bank. By disclosing a system and method thatremoves the actions of calculating, collecting or disbursing of taxesowed on given transactions from the merchant to other participants inthe financial authorization and collection phases of the transaction,the disclosed invention alleviates the burdens placed upon the merchantsand the consumers for calculating, collecting or disbursing of sales anduse taxes, thus creating a system that is sufficiently easy andreasonable to implement and enforce. This present invention can be usedfor the calculation, collection and disbursement of other, non-taxrelated, third-party fees payable upon on-line transactions.

[0037] Among the competitive advantages of the claimed invention overthese known systems are the following:

[0038] (1) Prior art systems are limited to point of sale integration,thus,

[0039] a. requiring the dedication of significant human, financial andtechnical resources for implementation and maintenance of these systems;

[0040] b. placing the responsibility for maintaining compliance throughfrequent updates of POS solution on the merchants; and

[0041] c. requiring direct business relationship between the tax serviceprovider and the merchant, raising complexity of marketing, sales, andoperations, thus increasing operational cost and impeding proliferation.

[0042] (2) Prior art system performance depends on Internet performanceand availability. Prior art systems require more than double the numberof communication transactions to be performed for each transaction,relying upon the merchant to acquire sufficient servers and bandwidth tohandle the extra traffic. By integrating the claimed invention withinthe transaction flow, tax related functionality will not requireadditional system performance by the merchant, and thus will not impedetransaction flow.

[0043] (3) Prior art Point-of-Sale systems require an automatic draftfrom merchants accounts, which, as described above, would be a deterrentfor many merchants, and which complicates debits arising fromtransaction reversals, etc.

[0044] (4) Prior art systems charge merchants license fees, pertransaction fee, or both. The claimed invention would generate itsrevenue base from the recipient of the tax revenue, rather than from thepayor.

[0045] The invention provides a method for calculating at least onethird party payment owed to a third party, the payment being owed aspart of a wide area network transaction between a first party located ata first node of the network and a second party located at a differentsecond node of the network, the method comprising the steps of:

[0046] generating an information packet on a first computer system ofthe first party, said information packet containing transaction data;

[0047] transmitting said information packet to a second computer systemof the second party;

[0048] determining whether or not said transaction data contains thirdparty payment data and, if not, adding third party payment data to saidtransaction data; and

[0049] transmitting to a third computer system transaction dataincluding third party payment data.

[0050] The invention also provides a method for calculating, collectingand disbursing one or more third party payments owed to one or morethird parties resulting from one or more transactions affected on a widearea network by a customer, wherein the transaction concerns a serviceand/or product provided by a merchant, the method comprising:

[0051] as a result of a customer affecting one or more electronictransactions for a product and/or service of a merchant, generating afirst information packet on a first computer system on a first node of awide area network, said first information packet containing transactiondata;

[0052] determining on a computer system on said first node of a widearea network whether or not said transaction data contains third partypayment data and, if not, adding third party payment data to saidtransaction data;

[0053] generating a second information packet, said second informationpacket containing said third party payment data;

[0054] transmitting said second information packet to a second computersystem on a second node of said wide area network; and

[0055] determining on a computer system on said first node of a widearea network whether or not said first or second transaction datacontains one or more amounts owed to one or more third parties; and, ifso, subtracting from transaction financial data said one or more amountsowed to said one or more third parties, and transmitting said one ormore amounts owed to said one or more third parties; and, if not, notperforming any further functionality on said transaction data.

[0056] A system of the invention includes a system for affecting one ormore third party payments owed to one or more third parties, the one ormore third party payments being owed as part of a transaction between aconsumer and a merchant, the system comprising:

[0057] a merchant node connected to a wide area network, wherein thefirst node comprises a first computer system for generating aninformation packet comprising transaction data corresponding to one ormore transactions between the merchant and a consumer and fortransmitting said information packet to a different second node;

[0058] a different second node connected to the wide area network fordetermining whether or not said transaction data contains third partypayment data and, if not, adding third party payment data to saidtransaction data and for transmitting transaction data containing thirdparty payment data to a different third node; and

[0059] a third node connected to the wide area network for receiving thethird party payment data.

[0060] Specific embodiments of the invention include those wherein: 1)said wide area network is the Internet; 2) said third party is agovernment agency; 3) said third party payment is a tax owed to agovernment agency; 4) said taxes are selected from the group consistingof sales taxes, use taxes and value added taxes; 5) said inquiry furthercomprises the step of inquiring whether transaction consumer is exemptfrom third party payment on said transaction; 6) said determiningcomprises the step of inquiring whether transaction merchant is exemptfrom third party payment on said transaction; 7) transaction merchantdata is added to said transaction data; 8) said third party payment iscalculated based upon transaction data contained in said informationpacket; 9) said calculation is performed by applying a predeterminedmathematical formula; 10) said third party can directly modify saidmathematical formula; 11) said information packet is generated by abilling software; 12) said first computer system is a merchant system oran Internet Payment Processing Gateway system; 13) said second computersystem is selected from the group consisting of an Internet PaymentProcessing Gateway system, a credit card association system, and abanking system; 14) said banking system is a credit card issuing bank ora merchant acquirer bank; 15) said third computer system is selectedfrom the group consisting of an Internet Payment Processing Gatewaysystem, a credit card association system, and a banking system; 16) saidbanking system is a credit card issuing bank or a merchant acquirerbank; 17) said financial data constitutes data for the transfer offunds; 18) said transaction constitutes a credit card transaction; 19)said transaction constitutes electronic payment transaction; 20) saidtransaction constitutes an e-commerce payment transaction; 21) saidfirst computer system is that of a banking system; 22) said bankingsystem is a credit card issuing bank or a merchant acquirer bank; 23)said first computer system is selected from the group consisting of acredit card association system, an Internet Payment Processing Gatewaysystem and a merchant system; and/or 24) said second computer system isselected from the group consisting of an Internet Payment ProcessingGateway system, a credit card association system, and a banking system.

[0061] Another aspect of the invention provides a system forcalculating, collecting and disbursing one or more third party paymentsowed to one or more third parties resulting from one or more electronictransactions affected on a wide area network between a customer and amerchant, the system comprising:

[0062] a first computer system connected in a first node of a wide areanetwork for generating a first information packet as a result of acustomer affecting one or more electronic transactions for a productand/or service of a merchant, said first information packet containingtransaction data;

[0063] a first transmission system for transmitting said transactiondata to a second computer system connected to a second node of said widearea network;

[0064] a second computer system connected in a second node of a widearea network for receiving and processing said first information packet;

[0065] a query protocol residing on said second computer system fordetermining whether or not said transaction data contains third partypayment data and, if not, for adding third party payment data to saidtransaction data;

[0066] a second transmission system for transmitting said transactiondata to a third computer system connected to said wide area network;

[0067] a third computer system of said wide area network connected tosaid wide area network for generating a second information packetcomprising said transaction financial data and third party payment data;

[0068] a third transmission system for transmitting said secondinformation packet to said second computer system connected to said widearea network;

[0069] a second query protocol residing on a fourth computer system fordetermining whether or not transaction financial data contains one ormore amounts owed to one or more third parties; and

[0070] a fourth transmission protocol for transmitting said financial;data to said third computer system for subtracting from transactionfinancial data said one or more amounts owed to said one or more thirdparties, and transmitting said one or more amounts owed to said one ormore third parties; and, if not, performing no further actions on saidtransaction financial data.

BRIEF DESCRIPTION OF THE DRAWINGS

[0071] The following drawings are part of the present specification andare included to further demonstrate certain aspects of the invention.The invention may be better understood by reference to one or more ofthese drawings in combination with the detailed description of thespecific embodiments presented herein.

[0072]FIG. 1 depicts a high-level block diagram of the standard priorart on-line transaction process.

[0073]FIG. 2 depicts a high-level block diagram of the standard priorart authorization process followed in an on-line transaction.

[0074]FIG. 3 depicts a high-level diagram of an illustrativeenvironment, implemented through the Internet, which embodies theteachings of the present invention along with basic inter-computeractions that occur in that environment and associated processingoperations.

[0075]FIG. 4 depicts a simplified high-level diagram of applicationprograms resident within invention systems.

[0076]FIG. 5 depicts the process of the disclosed invention for thecalculation of sales tax and authorization of the aggregate transactionamount, including sales-tax.

[0077]FIG. 6 depicts the process for the integration of the disclosedinvention with billing software.

[0078]FIG. 7 depicts the process for the integration of the disclosedinvention with the systems of 3^(rd) party gateway systems.

[0079]FIG. 8 depicts an alternative process for the integration of thedisclosed invention with the systems of 3^(rd) party gateway systems.

[0080]FIG. 9 depicts the standard fulfillment process followed in anon-line transaction of advising the financial network of the transactionfulfillment and commencement of fee collection phase.

[0081]FIG. 10 depicts the process of the disclosed invention for thefulfillment process of advising the financial network of the transactionfulfillment and commencement of the fee collection phase.

[0082]FIG. 11 depicts a high-level diagram of the Transaction ClientAgent shown in FIG. 4 which implements the current invention along withbasic inter-computer actions that occur in that environment andassociated processing operations.

[0083]FIG. 12 depicts a high level diagram of basic processing threadsperformed by the Transaction Client Agent shown in FIG. 11.

[0084]FIG. 13 depicts a high-level diagram of the Settlement Agent shownin FIG. 4 which implements the current invention along with basicinter-computer actions that occur in that environment and associatedprocessing operations.

[0085]FIG. 14 depicts a high level diagram of basic processing threadsperformed by the Settlement Agent shown in FIG. 13.

DETAILED DESCRIPTION OF CERTAIN EMBODIMENTS OF THE INVENTION

[0086] The present invention can be utilized in any networkedenvironment in which one or more third parties are entitled to receivecertain portions of payments for transactions being conducted in thenetwork between two other parties. Such an environment can encompass theInternet or an intranet, or any other environment in which transactionsare processed for authorization or for the transfer of payment data,including the actual transfer of funds through a network communicationchannel.

[0087] The present invention is discussed in the illustrative context ofuse in the authorization of an online transaction conducted over theInternet, in which the authorization request is processed through anInternet Payment Processing Gateway, providing gateway services to amerchant. The teachings of this invention can be easily incorporatedinto any similar distributed processing environment.

[0088] As used herein, the term “wide area network” means a networkcomprising plural different nodes of computers, servers and/or gateways,wherein the nodes are communicatively connected and located at differentlocales. For example, a first party node, a second party node and athird party node are each located at different locales but are connectedby a hard-wired and/or wireless system. At each occurrence, a node is astand-alone component (not part of a local area network) or a componentthat is part of a local area network. At each occurrence, a node isindependently selected from a computer, server or gateway. Exemplarywide area networks include the Internet or telephone networks. In aspecific embodiment, a first node is a merchant node, a second node is apayment processing gateway node, and a third node is a payment recipientnode.

[0089] As used herein, a transmission system is a computer line,wireless, Ethernet, land line, facsimile, Internet, wide area network,local area network, infrared, microwave, radio wave, and/or telephonebased system used to transmit information from one computer system toanother.

[0090] Authorization Process—FIG. 1 depicts the prior art process inwhich transaction data is transferred to the acquiring bank. In oneembodiment the transaction data is transferred from the consumer to thesystems of the merchant, which would then transfer said transaction datato the acquiring bank through a payment gateway. In an alternativeembodiment, the transaction data is transferred to the acquiring bankfrom the Consumer through the payment gateway, without passing throughthe systems of the online merchant. In yet an alternative embodiment thetransaction data is passed to the acquiring bank from the merchantdirectly, not through the systems of a payment gateway. This prior artmay include systems and methods for the calculation of third partypayments that are integrated in the merchant node only.

[0091] Transaction data is then transferred from the acquiring bank tothe issuing customer's credit card issuing bank. The transaction datamay be transferred to the issuing bank either directly, through thecredit card payment association, or in another alternative, through athird party processor. The ultimate purpose is to obtain confirmationthat the customer has sufficient funds to pay for the transaction, thatthe merchant is authorized to provide the customer with the purchasedgoods/services, and to obtain assurance that the merchant will be paidat the regular billing cycle.

[0092] Oftentimes, a third party gateway may be involved in the earlyphase of the Authorization Process, providing third party services tothe merchant. The Gateway may interact either directly with thecustomer, effectively bridging between the customer and the merchantbank (acquirer) at the billing authorization phase (so that the merchantis in effect taken out of the loop at this phase, and is provided withtransaction data after the effect). Alternatively, the merchant mightuse software provided by the gateway companies, or other 3^(rd) partyvendor software, that manages the billing phase of the transaction. Suchsoftware might be installed upon, and run from, the server systems of3^(rd) party providers (“ASP”) or directly installed and run from themerchants' systems. According to one embodiment, the billing software isinstalled and run from the node (computer system) of one or more 3^(rd)party providers.

[0093]FIG. 1 also depicts the fulfillment process typically followed ina standard on-line transaction process. Fulfillment is typicallyreferred to as the process in which a merchant advises a financialnetwork that it has fulfilled its part of the transaction, e.g., shippeda product and/or rendered a service, and the financial network shouldnow dedicate those funds that were captured during the authorizationphase to complete the financial settlement phase of the transaction,i.e. transfer the transaction funds from the consumer's account to thatof the merchant. A third party Internet Payment Processing Gateway maybe involved in the initial phase of transferring the merchants' noticeof fulfillment to the financial network. A third party processor mayalso be involved by transferring funds to the merchant's account andconcurrently debiting the accounts of the consumers' bank for thesettled transaction amount. The consumers' bank may debit the accountsof the consumer immediately for the complete transaction amount, or, itmay issue to the consumer a periodic statement for amounts owed therebydeferring the transfer of funds from the consumer's bank account to theconsumer's bank and/or the third party processor.

[0094]FIG. 2 depicts the prior art authorization process typicallyfollowed in a standard on-line transaction process. In one embodiment,such a transaction would proceed as follows. The Consumer conducts atransaction on the Merchant's web site. Upon conclusion of the shoppingcomponent of the transaction, the Consumer would exit the “shoppingcart” phase, and be transferred to the Authorization Process phase. Inthe Authorization Process phase, in order to complete the transaction,transaction data is transferred to the check-out component of thesystem, including transaction amount. The Consumer provides their creditcard number, as well as other verification information (name, billingaddress, contact information and optionally other identification and/orsecurity data, etc.) (“Transaction Data”).

[0095] The Transaction Data is forwarded via a transaction-authorizationrequest to an Acquirer in a process as depicted in FIG. 1, such as via a3^(rd) party payment gateway. The request includes the credit cardnumber and other transaction related data, and may include securityinformation, date, Merchant information and transaction amount. Thisamount may include sales tax or use tax if the Merchant has implementeda sales tax collection system within their internal transaction system.The transaction authorization request is then forwarded from theAcquirer Bank to the Issuer via the Association. Upon issuance of anauthorization response by either the Issuer Bank or the Association, theresponse is returned to the Merchant, via the Acquirer and the Gateway.The Merchant will then conclude the transaction with the Consumer basedupon the transaction-authorization response received.

[0096] If the transaction involves soft-goods (such as software, musicfile, video file, graphic file, text file, etc.) that are downloadedover the Internet upon authorization, capture and fulfillment requestsmay be initiated immediately upon conclusion of the authorizationtransaction. The merchant can incorporate deposit (fulfillment) requeststogether with the authorization request. Typically, if the transactioninvolves hard goods (such as articles, products, items, etc.) that areto be shipped from the Merchant, the fulfillment request may not beissued until the day the goods are actually shipped.

[0097] The prior art system described in FIG. 2 may include a system andmethod for the calculation of third party payments that are integratedin the merchant node only.

[0098] In FIG. 3, an explanation is provided of the different systemsand participants that participate in one embodiment of on-linetransaction authorization and settlement processes when the claimedinvention is integrated for purposes of calculating, authorizing orcollecting and disbursing taxes owed to a third party. For simplicityand consistency, reference will be made throughout to theseparticipants:

[0099] A third party may or may not be due a third party payment thatoccurs as part of one or more transactions between the consumer andmerchant. The system and method of the invention is capable ofdetermining whether or not a third party payment is due to one or morethird parties as part of the transaction between the consumer andmerchant. A third party can be any party to which an amount is owed as aresult of the transaction. In a specific embodiment, the third party isa government agency and the third party payment is a tax. In anotherspecific embodiment, the third party may be the owner of a telephonenetwork, and the third party payment is a commission owing to thenetwork owner on transactions conducted via the network.

[0100] The Consumer is the end user who is making an on-linetransaction. As used herein, the term “consumer” is a person or businessthat obtains a service and/or good from a merchant by way of one or moretransactions. A consumer can obtain the service and/or good bypurchasing, leasing, renting, or providing some form of considerationfor receiving and benefiting from the service and/or good. The consumeris typically the party who is responsible for the sales and use tax, andwho, typically, by law, is responsible for reporting and dispensing ofuse tax. The consumer may be the party that interacts with the merchantshopping-cart for purpose of concluding an online transaction.

[0101] The Merchant is an on-line retailer with whom the consumertypically interacts for the online transaction. As used herein, the term“merchant” is a person or business that provides a service and/or good.The merchant is usually the party who is responsible for collecting anddispensing of sales tax. The Merchant's shopping cart and shippingsystems will usually interact with the third party Internet PaymentProcessing Gateway systems. The Merchant will usually also be therecipient of funds transferred for payment on account of the underlyingtransaction. Funds are usually received directly into the Merchant'saccounts managed upon the systems of the Acquirer bank, and are nottransferred through the Internet Payment Processing Gateway.

[0102] The Internet Payment Processing Gateway is usually an on-linethird party that would provide a gateway from the on-line presence ofthe merchants into the financial networks, typically the Acquirer bankand the credit-card processors (akin to the credit-card swiping machinethat is encountered at the retailer's physical store, and that its solefunction is to connect the merchant to the credit-card processor).Gateways may render their services by providing either:

[0103] (i) Direct processing services—the merchant merely displays theGateway's transaction page, which is actually hosted on the gateway'ssecured server. The customer inputs their transaction informationdirectly into this page, i.e. directly into the systems of the gateway;or

[0104] (ii) Processing software that the merchants integrate into theirown systems, and which they use to enable their systems to interactdirectly to the processor and the merchant bank.. In this method, thecustomer inputs their transaction data into the systems of the merchant,which is then transferred to the gateway or to the processing bank.

[0105] The Gateway may provide the merchant's software modules (COMcomponents) that collect the credit card and billing information, andcapture the customer's transaction data from the merchant's securedpage, connect and transfer the data to the gateway's systems

[0106] The Acquirer is the bank of the Merchant through which theMerchant submits its request for transaction authorization and approval,and from which the Merchant receives the ultimate transaction payment.The Association is the credit card organization or business that servesas a clearing-house for transaction authorization and payment.

[0107] The Issuer is the bank of the Consumer, which issues andmaintains the consumer's credit card account and through which theconsumer receives credit, account information, service, and makestransaction payments.

[0108]FIG. 3 is a depiction of the systems, and their components, thatparticipate in one embodiment of the claimed invention. The consumerenters the shopping cart phase of an on-line transaction on a merchant'swebsite on the Internet. The merchant's computer system obtains taxcalculation from a tax calculation engine, and payment authorizationfrom the financial network. Tax calculation engine can be installed onthe systems of the merchant, or in the alternative, on a 3^(rd) partyprovider, including those of the claimed invention. As part of thetransaction data received by the Gateway, the merchant's computer systemverifies shipping information (confirmation of shipping or of intent toship) and sends fulfillment notification and payment capture data to theGateway. The Gateway, in turn, forwards the authorization andfulfillment data to a credit card financial network, which in oneembodiment comprises the merchant's bank, the association, and thecustomer's issuer bank. When appropriate, funds are then transferred tothe Merchant in payment of the good and/or service obtained by thecustomer, and the customer is billed by the issuer bank for payment madeto the merchant. An alternative embodiment would include a scenariowhere tax calculation services are requested by the systems of theGateway in relation to the transaction and forwards authorization,fulfillment and payment capture data to the system of the claimedinvention (see below) that determines the tax due to a taxing authority,transfers tax funds to the taxing authority and send and invoice to themerchant for amounts owing.

[0109]FIG. 4 describes an embodiment of the components of the ClaimedSystem. As an online sales-tax system, the Claimed System will typicallyhave a tax transaction processor, that will include a tax calculationengine. The Claimed System will also include a repository data base, atransaction processor for Authorization and Capture transactions, taxcollection and fulfillment engines, that will include a billing engine,and tax collection and disbursement collection engines.

[0110] As used herein, the Client Agent is a software element thatbridges the client system and the system of the claimed invention. TheClient Agent is used in situations where the system, which uses theservices offered by the claimed invention (“client system”), maintainsan independent state from the systems of the claimed invention. In suchscenarios, a bridge between the two systems is required, that willenable high frequency, highly scalable communications between the twosystems. In the phase in which the transaction is obtainingauthorization from the financial network, the function of the ClientAgent would be to intercept transactions that enter the client system,transfer them to the system of the claimed invention, undergofunctionality defined by the claimed invention, and return thetransaction data to the client system. In one embodiment, suchfunctionality includes calculation of tax rates or the registration ofthe transaction in the system of the claimed invention, for furtherprocessing at a future time period. The Client Agent may also interceptthe response received from the authorization process, and process theresponse according to criteria defined by the system.

[0111] A Tax Fulfillment Client Agent may also reside on a clientsystem. Its function would be to intercept transaction data for thetransfer of transaction funds, pass such payment data to the systems ofthe claimed invention for processing. Such processing may include thefiltering out of third party payment obligations. By utilizing a lowimpact client agent, the claimed invention can seamlessly provide thecomplex functionalities offered by the system, such as authorization andfulfillment, without having any adverse impact upon current and acceptedonline transaction protocols and specifications, enabling a quick,efficient and non-costly integration of the claimed invention intodifferent client systems

[0112] As used herein, the Claimed System is the system engine of theclaimed invention that performs substantially the full scope offunctionality provided by the invention systems. In one embodiment, suchfunctionality includes the calculation of tax rate and the storing andprocessing of transaction data for the transfer of funds owing to thirdparties, such as transaction taxing authorities.

[0113] The authorization engine performs some of the functionalityrequired during the authorization process. Information that is receivedfrom the authorization process through the Transaction Client Agent isprocessed, and if needed the transaction processor passes authorizationrequest information to a tax calculation engine. The transactionprocessor will also cause the relevant transaction information to besaved, then, if tax calculation functionality were also required, fillsin the relevant fields on the transaction and passes the revisedtransaction information back to the Transaction Client Agent. As partsof the authorization protocol are being exchanged between components ofthe system, the authorization engine receives the correspondingtransactions (e.g. authorization request response) and acts according tothe business rules relevant to this stage of the transaction. Therelevant data from each stage of the authorization request protocol maybe persisted and updated in an authorization request repository databasefor further reference.

[0114] Because in some scenarios the transaction client agent istypically integrated in a critical path to the online transactionstream, speed and reliability will usually be critical in order toensure that the transaction process is not hampered by integration ofthe present system and/or method into an existing system and/or method.

[0115] The tax calculation engine obtains data directly from an onlineorder-entry system (or e-procurement system), calculates the tax, andsends the transaction data, including the tax data, back into thetransaction flow. As tax calculation request usually occur as part of anonline real-time or near real time transactions, operationalrequirements of the tax calculation engine may include the ability toperform this functionality at high speed with high levels ofreliability. Tax calculation may be performed by obtaining informationof the place where the transaction occurs (transaction nexus) andcross-referencing such information with the tax rates prevailing in suchnexus. Transaction nexus may include several taxing jurisdictions, suchas country, state, county, and city. The tax calculation engine mayincorporate consumer and merchant specific data that may impact the taxcalculation, such as where the consumer benefits from tax exempt status,or where a tax holiday governs the specific transaction.

[0116] The Tax Fulfillment Engine would deal with the collection phaseof online purchases, including billing and tax distribution. The taxcollection engine may collect sales and use taxes upon relatedtransactions, and disburse the taxes appropriately. Transaction datacould also be forwarded to the Fulfillment Engine from the repositorydatabase. Tax collection and disbursement services may be performed forstandard transactions, in which tax calculation services were rendered,and also for transactions where authorization was not performed usingthe claimed invention. Tax collection can be performed by eitherinteracting directly with the fund transfer engine, and collecting taxfees as these funds transfer from the Issuer to the Acquirer, orMerchants may be invoiced directly or indirectly for taxes owing.

[0117] In an exemplary transaction, while being forwarded forauthorization by the issuing bank, transaction financial data of anon-line transaction, would be intercepted by the transaction clientagent as it enters into the client systems, such as those maintained bya financial gateway providing Internet gateway services to an on-linemerchant. The transaction data would be transferred by the transactionclient agent to the Tax Transaction Processor of the Claimed System fortax processing. The Tax Transaction Processor would enable the TaxCalculation Engine to calculate sales taxes owing on the giventransaction, and the Authorization Engine would process the transactionfor further authorization and fulfillment. The transaction data,together with the tax data, would then be returned to the transactionclient agent for authorization by the issuing bank, and would alsodeposit the transaction data in the tax repository data-base of theClaimed System. At a predefined time interval, the transaction datawould be forwarded from the repository to the tax fulfillment engine.This may occur, for example, in response to the transaction data beingfurther intercepted by the transaction client agent at the time that thetransaction data is being forwarded by the merchant for financialfulfillment. The tax collection and Client Settlement Agent wouldprocess the financial data so that the merchant is properly invoiced forthe taxes owing and that the corresponding taxes be forwarded to the taxauthorities as required. This transaction flow is further described inFIG. 5.

[0118]FIG. 5 depicts an example of the process of the invention for thecalculation of sales tax and authorization of the aggregate transactionamount, including calculated sales tax as performed by the systemdepicted by FIG. 4. As illustrated in this figure, the transactionauthorization request is intercepted by the transaction client agentfurther described in FIG. 4. The transaction is intercepted by eitherthe Authorization Client Agent or the Tax Calculation Client Agent. Inan embodiment where transaction is intercepted by the transaction clientagent of the claimed invention and, after verification that thetransaction is of the sort that should undergo processing according tothe claimed invention, is transferred to the transaction processor ofthe Claimed System.

[0119] Upon entry of transaction data into the Claimed System, initialscreening inquiries (determination) would be made, such as whether ornot the transaction has already undergone Claimed System functionalityor whether tax calculation is required. Such an inquiry may be, by wayof example, verifying whether or not the transaction data includes apreviously integrated unique identifier issued by the Claimed System orby way of comparing the unique transaction identifier with a list oftransaction identifiers that have previously undergone functionality ofthe claimed invention. The System may have mechanisms that will preventperforming claimed functionalities more than once on any singletransaction. In such situations, the System would terminate processingof the transaction by the claimed invention. Exemplary situations wouldinclude the merchant opting out of participation in the Claimed System,the consumer meeting (requesting and/or approving) tax exempt status,and/or other such conditions.

[0120] For example, a further inquiry may be made as to whether or notthe respective Merchant has opted-out of the System. Merchant's mayelect to opt out of certain functionalities offered under the claimedinvention if, for example, they integrated external systems forcalculating transaction sales tax. Such Merchants may still retain otherfunctionalities offered under the claimed invention, such as, forexample, collection and disposition of sales tax proceeds. In suchsituations, the System would preferably return the transaction to thestandard authorization process.

[0121] As an additional example, further inquiry (determination) may bemade as to whether or not the consumer has registered any tax-exemption.Tax-exemption status may be included in the specific transaction data,or it may be compared to a system database that includes specifictax-exempt data. If pre-existing tax-exempt data is included in thesystem database, the system may forward to the consumer a request toconfirm the tax-exemption for the specific transaction. In such events,if the customer approves tax-exempt status, the transaction is returnedto the standard authorization process. If the customer does not approvetax-exempt status, the transaction may continue under the claim system.

[0122] If the transaction does not have a previous unique transactionidentifier according to the invention, the Claimed System may thencreate a unique transaction identifier for further tracking and auditingpurposes, and system calculations would be performed calculating therespective sales or use tax on a given transaction. The resulting amountwould be added to the transaction amount requiring transactionauthorization.

[0123] An inquiry is then optionally made to obtain furtherauthorization by the consumer of the modified transaction amount thatincludes the respective tax amounts. If such additional authorization isrequired, the Claimed System may forward a request to receive suchconfirmation. If such confirmation is not required, or, if it isrequired and such confirmation is received, the Claimed System wouldforward the transaction back to the transaction client agent, to beforwarded for further authorization processing according to the standardauthorization process by the credit card financial network (CCN) furtherdescribed in FIG. 2.

[0124] Once the transaction has undergone standard authorizationprocesses, and is returned to the client system, the transaction datamay be intercepted by the Authorization Client Agent. An inquiry may bemade as to the CCN authorization response pertained to the taxtransaction data calculated by the Claimed System. If such authorizationpertained to such Claimed System calculated data, the transaction clientagent will forward the transaction data to the tax transaction processorof the Claimed System for further processing. Such further processingwould include inclusion of the authorization response in the taxrepository database for queuing for financial fulfillment at a futuredefined time period. The transaction data is also returned to thetransaction client agent to be forwarded to the merchant and theconsumer for notification of the authorization response. In descriptionabove, in many cases a proactive call to the transaction client agentmay substitute interception and inquiry.

[0125] The claimed invention may be integrated into many differentpoints of the transaction authorization flow. FIG. 6, FIG. 7 and FIG. 8depict some of the different positions within the transaction flow intowhich the claimed invention can be integrated. FIG. 6 depicts, forexample, the disclosed invention being integrated into billing software.In this scenario, the Claimed System Client Transaction Agent is placedinto the billing software, and may intercept the transactionauthorization request once the consumer hits (clicks on, activates) the‘submit’ button in the graphic user interface of a billing softwareprogram. FIG. 7 depicts, for example, the disclosed invention beingintegrated into the systems of the Internet Payment Processing Gatewayor the Merchant bank if payment gateway is not involved, where a billingsoftware program forwards the transaction data to the systems of theGateway. In this embodiment, the Claimed System Client Transaction Agentis inserted into the systems of the gateway/Merchant Bank, and mayintercept the transaction authorization request once the transactionrequest enters into the systems of the Gateway/Merchant Bank. FIG. 8depicts, for example, the transaction client agent of the disclosedinvention is integrated into the systems of the Internet PaymentProcessing Gateway where the billing page is hosted in the systems ofthe Gateway. In this scenario, the Claimed System Client TransactionAgent would intercept the transaction authorization request once theuser hits the submit button in the gateway-hosted billing page.

[0126]FIG. 9. depicts an exemplary transaction flow of the fulfillmentrequest part of the financial transaction, as practiced by the priorart. Upon conclusion of its part of the transaction, a Merchant maysubmit a fulfillment statement for the amount owed under the concludedtransaction. Such requests may be submitted via a third party InternetPayment Processing Gateway, which may batch several requests, andforward them into the financial network, such as the Acquirer Bank. TheInternet Payment Processing Gateway might not be reimbursed for theirservices from the financial network and might instead be reimbursed byway of issuing periodic invoices to the Merchant for services rendered.The Acquirer bank may aggregate fulfillment requests received, andforward them via the Credit Card Association to the issuing bank. TheAcquirer Bank may have its accounts credited directly from the CreditCard Association, or in another alternative, receive the requested feesfrom the Consumer's Issuing Bank. After transferring funds owed on theunderlying transaction, the Issuing Bank may issue periodic invoices tothe Consumers for fees owed or may deduct fees owed directly from theaccount(s) of the Consumer.

[0127]FIG. 10 depicts an example of the process of the disclosedinvention for the fulfillment and settlement process of advising thefinancial network of the transaction fulfillment and commencement of thesettlement and fee collection phase. The fulfillment request may beintercepted by the Claimed System Client Agent, and, after verificationthat the transaction is of the sort that should undergo processingaccording to the claimed invention, it would be transferred to theClaimed System. The Claimed System Client Agent may process the batchfile so as to prevent the underlying transaction from undergoing dualfulfillment and settlement processes. Such processing may include theremoval of the underlying transaction from the subject matter batchfile.

[0128] Within the Claimed System, an initial inquiry may be made whethera transaction is subject to Claimed System processing according to theclaimed method. Such an inquiry may be, by way of example, of verifyingwhether or not the transaction data includes a previously integratedClaimed System unique identifier or by way of comparing the uniquetransaction identifier with a list of transaction identifiers that havepreviously undergone functionality of the claimed invention. The Systemmay have mechanisms that will prevent performing claimed functionalitiesmore than once on any single transaction. In such situations, the Systemwould return the transaction to the standard fulfillment process.

[0129] A further inquiry may be made as to whether or not the respectiveMerchant has requested Claimed System fulfillment services only.Merchants may elect to use Claimed System fulfillment services only(alone) if, by way of example, they perform tax calculation ortransaction authorization processes independent of those performed bythe Claimed System.

[0130] The Claimed System may then create a unique fulfillmentidentifier, for further tracking, control and auditing purposes.

[0131] The Claimed System would then forward the fulfillment request forfulfillment processes and for fee collection and tax distributionpurposes.

[0132]FIG. 11 depicts an overview of the Claimed System Client Agent asit would be implemented in certain embodiments of the claimed inventionthat require segregation between the systems of the client and those ofthe claimed invention. In different embodiments, the Claimed Systemclient Transaction Agent is implemented at different phases of thetransaction authorization flow, such as immediately after thetransaction check-out module that is part of the Merchant's shoppingcart, or in the systems of the gateway providing Internet gatewayservices to the merchant, or upon the systems of the acquirer bank. TheClaimed System Client Transaction Agent may then interact with its pointof integration for the purpose of intercepting transactions andtransferring them to the system of the Claimed invention, for theperformance of system functionalities, such as tax calculation. TheClaimed System Client Transaction Agent may then return the transactiondata, including data that may have been added in by the claimed system,such as tax data, to the point of integration for purpose of beingforwarded for transaction authorization. The transaction client agentmay also be called by the systems of the Merchant or the integrationpartner, in order to notify the Claimed System of transactions, requestsand responses. In certain embodiments, only tax calculation requestsneed to be serviced in “real time” whereas in other embodiments (such asAuthorization and Capture) the functionality is that of “notification”to Claimed System, and the of their processing by Claimed System is notrelevant to the completion of the online sale transaction.

[0133] The Claimed System Client Transaction Agent may also interceptthe transaction from the integration partner for the purpose offorwarding the transaction for further Claimed System functionality. TheCheck Out Module and the integration partner may be one and the samesystems. Transaction flow performed by the transaction client agent isfurther depicted in FIG. 13.

[0134]FIG. 12 depicts some of the basic processing threads that would beperformed by the Claimed System Client Transaction Agent shown in FIG.11 in an embodiment of the Transaction Agent in a system for thecalculation of sales tax on on-line transactions. As illustrated in thisfigure, a transaction would be intercepted by the Claimed System ClientTransaction Agent, and a first inquiry may be made as to whether thetransaction is of the sort that is typically supposed to undergofunctionality typically performed by the Claimed System. If the answeris no, the transaction would be returned to the standard authorizationprocess. A further inquiry may be made as to whether the transactionincludes data that is typically added by the Claimed System, such assales tax data that is pertinent to the underlying transaction. If theanswer is no, the transaction would forwarded to the Claimed System forthe purpose of performing the relevant functionalities, such as thecalculation of tax. Once the relevant functionality is performed, thetransaction would be returned to the Claimed System Transaction Agent,where a further inquiry would be made as to where the transaction shouldbe directed—back to the system from which it was received or forwardedfor further processing, such as authorization by the credit-cardfinancial network. Once the transaction undergoes network functionality,such as authorization by the financial or credit card network, it wouldbe further intercepted by the Claimed System Transaction Agent for thepurpose of registering said functionality for auditing, control andmanagement purposes, as well as further processing, such as taxdisbursement and merchant billing.

[0135]FIG. 13 depicts an exemplary overview of the Claimed System TaxFulfillment Agent as such would be implemented in embodiments thatrequire segregation between the client systems and the systems of theClaimed Invention that perform financial fulfillment and settlementfunctionalities. The Claimed System Client Tax Fulfillment Agent may beimplemented at different phases of the transaction flow, such asimmediately at the Internet Payment Processing Gateway, in the systemsof the acquirer bank or those of the credit card association. In suchembodiments, the Claimed System Client Settlement Agent would interceptfulfillment and settlement requests and forward these to the ClaimedSystem for further processing, billing and distribution of proceeds, asrequired. The Claimed System Client Settlement Agent may also intercept,or advised by the partner of, the transfer of funds, and transfer theseto the Claimed System for further processing, and the distribution offunds as required, such as the transfer of tax revenue to the respectivetaxing authorities.

[0136]FIG. 14 depicts the basic processing threads that would beperformed by the Claimed System Client Fulfillment Agent depicted inFIG. 13. As illustrated in this figure, payment data may be interceptedby the Claimed System Client Fulfillment Agent, and a first inquirywould be made as to whether the payment data is part of an electronicfund transfer system. If the answer is yes, the Claimed System ClientFulfillment Agent would then query the Claimed System as to amounts thatare to be deducted for the given transaction, such as tax revenue owing.The Claimed System Client Fulfillment Agent would then deduct saidamounts, and forward them for distribution accordingly. If the paymentdata is not part of an electronic fund transfer system, the ClaimedSystem Client Fulfillment Agent would forward the payment data to theClaimed System for billing and fee distribution using alternativemethods, such as independent billing and invoicing of different clients,such as the Internet Payment Processing Gateway or invoicing themerchant directly.

[0137] The above is a detailed description of particular embodiments ofthe invention. It is recognized that departures from the disclosedembodiments may be made within the scope of the invention and thatobvious modifications will occur to a person skilled in the art. Thoseof skill in the art should, in light of the present disclosure,appreciate that many changes can be made in the specific embodimentswhich are disclosed herein and still obtain a like or similar resultwithout departing from the spirit and scope of the invention. All of theembodiments disclosed and claimed herein can be made and executedwithout undue experimentation in light of the present disclosure.

We claim: 1) A method for calculating at least one third party payment owed to a third party, the payment being owed as part of a wide area network transaction between a first party located at a first node of the network and a second party located at a different second node of the network, the method comprising the steps of: a) generating an information packet on a first computer system of the first party, said information packet containing transaction data; b) transmitting said information packet to a second computer system of the second party; c) determining whether or not said transaction data contains third party payment data and, if not, adding third party payment data to said transaction data; and d) transmitting to a third computer system transaction data including third party payment data. 2) The method according to claim 1) wherein said wide area network is the Internet. 3) The method according to claim 1) wherein said third party is a government agency. 4) The method according to claim 3) wherein said third party payment is a tax owed to a government agency. 5) The method according to claim 4) wherein said taxes are selected from the group consisting of sales taxes, use taxes and value added taxes. 6) The method according to claim 1) wherein said inquiry further comprises the step of inquiring whether transaction consumer is exempt from third party payment on said transaction. 7) The method according to claim 1) wherein said determining comprises the step of inquiring whether transaction merchant is exempt from third party payment on said transaction. 8) The method according to claim 7) wherein transaction merchant data is added to said transaction data. 9) The method according to claim 1) wherein said third party payment is calculated based upon transaction data contained in said information packet. 10) The method according to claim 9) wherein said calculation is performed by applying a predetermined mathematical formula. 11) The method according to claim 10) wherein said third party can directly modify said mathematical formula. 12) The method according to claim 1) wherein said information packet is generated by a billing software. 13) The method according to claim 1) wherein said first computer system is a merchant system or an Internet Payment Processing Gateway system. 14) The method according to claim 1) wherein said second computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 15) The method according to claim 14) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 16) The method according to claim 1) wherein said third computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 17) The method according to claim 16) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 18) The method of claim 1, wherein after step c), the method further comprises the step of: c′) subtracting from transaction financial data said amounts owed to third party. 19) The method according to claim 18) wherein said financial data constitutes data for the transfer of funds. 20) The method according to claim 19) wherein said transaction constitutes a credit card transaction. 21) The method according to claim 19) wherein said transaction constitutes electronic payment transaction. 22) The method according to claim 19) wherein said transaction constitutes an e-commerce payment transaction. 23) The method according to claim 18) wherein said wide area network is the Internet. 24) The method according to claim 18) wherein said third party is a government agency. 25) The method according to claim 18) wherein said third party payments are selected from the group consisting of taxes owed to a government agency, sales taxes, use taxes, and value added taxes. 26) The method according to claim 25) wherein said third party payment equals zero. 27) The method according to claim 18) wherein said first computer system is that of a banking system. 28) The method according to claim 27) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 29) The method according to claim 18) wherein said first computer system is selected from the group consisting of a credit card association system, an Internet Payment Processing Gateway system and a merchant system. 30) The method according to claim 18) wherein said second computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 31) The method according to claim 30) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 32) The method according to claim 18) wherein said third computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 33) The method according to claim 32) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 34) The method according to claim 18) wherein said third computer system is the same as the second computer system. 35) A method for calculating, collecting and disbursing one or more third party payments owed to one or more third parties resulting from one or more transactions affected on a wide area network by a customer, wherein the transaction concerns a service and/or product provided by a merchant, the method comprising: a) as a result of a customer affecting one or more electronic transactions for a product and/or service of a merchant, generating a first information packet on a first computer system on a first node of a wide area network, said first information packet containing transaction data; b) determining on a computer system on said first node of a wide area network whether or not said transaction data contains third party payment data and, if not, adding third party payment data to said transaction data; c) generating a second information packet, said second information packet containing said third party payment data; d) transmitting said second information packet to a second computer system on a second node of said wide area network; and e) determining on a computer system on said first node of a wide area network whether or not said first or second transaction data contains one or more amounts owed to one or more third parties; and, if so, subtracting from transaction financial data said one or more amounts owed to said one or more third parties, and transmitting said one or more amounts owed to said one or more third parties; and, if not, not performing any further functionality on said transaction data. 36) The method according to claim 35) wherein said wide area network is the Internet. 37) The method according to claim 35) wherein at least one of said one or more third parties is a government agency. 38) The method according to claim 37) wherein at least one of said third party payments is a tax owed to said government agency. 39) The method according to claim 38) wherein said tax is selected from the group consisting of sales tax, use tax, and value added tax. 40) The method according to claim 35) wherein said step f) comprises the step of determining whether or not the consumer is exempt from paying said one or more third party payments on said transaction. 41) The method according to claim 40) further comprising the step of adding on a computer system on said first node of a wide area network transaction consumer data to at least one of said transaction data or said transaction financial data. 42) The method according to claim 40) wherein said third party payment data reflects no third party payment owed by the consumer. 43) The method according to claim 35) further comprising the step of determining on a computer system on said first node of a wide area network whether or not said merchant is exempt from paying said one or more third party payments on said transaction. 44) The method according to claim 43) further comprising the step of adding on a computer system on said first node of a wide area network merchant data to said transaction data. 45) The method according to claim 43) wherein third party payment data reflects no third party payment owed by the merchant. 46) The method according to claim 35) wherein at least one of said one or more third party payments is calculated based upon transaction data contained in said information packet. 47) The method according to claim 46) further comprising the step of applying on a computer system on said first node of a wide area network a predetermined mathematical formula to calculate said one or more third party payments. 48) The method according to claim 47) wherein at least one of said one or more third parties can directly modify said mathematical formula. 49) The method according to claim 35) wherein step a) comprises the step of generating said first information packet with billing software. 50) The method according to claim 35) wherein said financial data comprises data regarding the transfer of funds to at least one of said one or more third parties. 51) The method according to claim 50) wherein said transaction is selected from the group consisting of a credit card transaction, a debit card transaction, an electronic payment transaction, and an e-commerce payment transaction. 52) The method according to claim 35) wherein said transaction financial data indicates no amount is due to at least one of said one or more third parties. 53) The method according to claim 35) wherein said first computer system is a merchant system. 54) The method according to claim 53) wherein said merchant system comprises a point of sale. 55) The method according to claim 35) wherein said first computer system is an Internet Payment Processing Gateway system or a merchant system. 56) The method according to claim 35) wherein said second computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 57) The method according to claim 56) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 58) The method according to claim 35) wherein said third computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 59) The method according to claim 58) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 60) The method according to claim 35) wherein said fourth computer system is selected from the group consisting of a banking system, a credit card association system, an Internet Payment Processing Gateway system, and merchant system. 61) The method according to claim 60) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 62) A system for affecting one or more third party payments owed to one or more third parties, the one or more third party payments being owed as part of a transaction between a consumer and a merchant, the system comprising: a) a merchant node connected to a wide area network, wherein the first node comprises a first computer system for generating an information packet comprising transaction data corresponding to one or more transactions between the merchant and a consumer and for transmitting said information packet to a different second node; b) a different second node connected to the wide area network for determining whether or not said transaction data contains third party payment data and, if not, adding third party payment data to said transaction data and for transmitting transaction data containing third party payment data to a different third node; and c) a third node connected to the wide area network for receiving the third party payment data. 63) The system of claim 62), wherein said wide area network is the Internet. 64) The system according to claim 62), wherein said third party is a government agency. 65) The system according to claim 64) wherein said third party payment is a tax owed to a government agency. 66) The system according to claim 65) wherein said taxes are selected from the group consisting of sales taxes, use taxes and value added taxes. 67) The system according to claim 62) wherein said inquiry further comprises the step of inquiring whether transaction consumer is exempt from third party payment on said transaction. 68) The system according to claim 62) wherein said determining comprises the step of inquiring whether transaction merchant is exempt from third party payment on said transaction. 69) The system according to claim 68) wherein transaction merchant data is added to said transaction data. 70) The system according to claim 62) wherein said third party payment is calculated based upon transaction data contained in said information packet. 71) The system according to claim 70) wherein said calculation is performed by applying a predetermined mathematical formula. 72) The system according to claim 71) wherein said third party can directly modify said mathematical formula. 73) The system according to claim 62) wherein said information packet is generated by a billing software. 74) The system according to claim 62) wherein said first computer system is a merchant system or an Internet Payment Processing Gateway system. 75) The system according to claim 62) wherein said second computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 76) The system according to claim 75) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 77) The system according to claim 62) wherein said third computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 78) The system according to claim 77) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 79) The system according to claim 62) wherein said financial data constitutes data for the transfer of funds. 80) The system according to claim 79) wherein said transaction constitutes a credit card transaction. 81) The system according to claim 80) wherein said transaction constitutes electronic payment transaction. 82) The system according to claim 80) wherein said transaction constitutes an e-commerce payment transaction. 83) The system according to claim 79) wherein said wide area network is the Internet. 84) The system according to claim 79) wherein said third party is a government agency. 85) The system according to claim 79) wherein said third party payments are selected from the group consisting of taxes owed to a government agency, sales taxes, use taxes, and value added taxes. 86) The system according to claim 85) wherein said third party payment equals zero. 87) The system according to claim 79) wherein said first computer system is that of a banking system. 88) The system according to claim 87) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 89) The system according to claim 79) wherein said first computer system is selected from the group consisting of a credit card association system, an Internet Payment Processing Gateway system and a merchant system. 90) The system according to claim 79) wherein said second computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 91) The system according to claim 90) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 92) The system according to claim 79) wherein said third computer system is selected from the group consisting of an Internet Payment Processing Gateway system, a credit card association system, and a banking system. 93) The system according to claim 92) wherein said banking system is a credit card issuing bank or a merchant acquirer bank. 94) The system according to claim 79) wherein said third computer system is the same as the second computer system. 